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Venture Capital

The Underrepresentation of Female Investors and Venture Capitalists

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Nearly a year ago, I wrote a post on the state-of-the-union with respect to female owned businesses and, particularly, how the United States compared with the rest of the world in the various aspects of female entrepreneurship measured by Dell in its Global Women Entrepreneur Leaders Scorecard. (Recap: Good news: the U.S. was ranked #1 on the Scorecard. Not so good news: the U.S. won its gold medal with an overall score of 71 (out of 100), which is the equivalent of a C minus.) 

In the first blog post, one of the “inalienable truths” of female entrepreneurship that I cited was: “While statistics show that funding of female-led companies is on the rise, a significant gap in fundraising and financing (still) exists for female entrepreneurs.” Following up on that “truth,” in this post, I’ll explore another distinct (but perhaps related) area of gender imbalance in the entrepreneurship ecosystem: the underrepresentation of female investors and venture capitalists (“VCs”).   

What?

Pop-quiz time: Before reading any further, give me your best (educated) guess as to what percentage of partners in the top 100 venture firms are women? 

[Ready?]

How does 15% sound to you? Lower than you thought? 

[If so, take a deep breath.]

According to a 2016 CrunchBase report, the number is actually closer to 7%. Depending on your resource, I was able to find statistics that suggested perhaps the number was closer to 8% or 9%. But, definitely still in the single digits and still very staggering to contemplate.

Why?

This is the million (well, likely billion) dollar question. As you’d expect, there is a lot of research being devoted to providing insights into this question, but for now, there aren’t a ton of answers. I mentioned above that the gap in fundraising for female entrepreneurs may be related to the current topic of gender imbalance in venture capital investing. Not surprisingly, research has affirmed that women-led companies have a greater chance of getting funded by women VCs (with some sources citing that the chances of funding double). For those looking for a primer on some of the insights emerging from early research on this topic, there are dozens of relevant articles on point. Both the CrunchBase report and the Columbia University article on Women in Venture Capital are interesting starting points for the discussion.

But we’re the “best.” This “issue” isn’t distinct to the U.S., right?

If you read the first post (recap: the U.S. was #1 in the Dell study), you may assume (as I did) that since we’re a world leader in female entrepreneurship, these imbalances can’t be unique to the U.S. and that we must be handling these issues better than other countries. I didn’t find a smoking gun to indicate that the U.S. is alone in its struggle to identify and address these issues, but I did find an interesting article about female entrepreneurship and female VCs in China. The article provided some eye-opening facts and perceptions about females in the technology VC industries in China:

  1. The largest venture capital fund ever raised by a woman is in China (sorry, Silicon Valley). Chen Xiaohong is a 46 year old former librarian who, while keeping a somewhat low profile, has revolutionized China’s VC industry while having more than $1 billion in assets under management.
  2. The Chinese government estimates that 55% of internet companies in China are founded by women. When compared against the U.S. where only 22% of startups have at least one woman on their founding teams, the U.S.’s “gold medal” from the Dell study seems a little less shiny.
  3. Firms like the China-based Qiming Venture Partners are bucking the U.S. VC trend as it relates to female partners. With four out of nine investing partners being female, a (male American) partner at the firm notes: “The venture capital industry in the U.S. has been a private men’s club. It has been much more of a meritocracy for women in China.” While the article admits that China still struggles with gender imbalances and inequities, I was surprised that China was lauded for (quietly) becoming one of the best places in the world for women venture capitalists and entrepreneurs.

What’s next?

I’m likely leaving you with more questions than answers. In the blog world, that provides additional food for thought for future posts. There are great people in the local community who are tackling this issue head-on and bucking some trends of their own. My hope is that our next post on this topic can introduce (or reintroduce) some of them to you.

Have questions or want more information? Please comment below, email me, or connect with me on LinkedIn or Twitter.

The blog content should not be construed as legal advice.

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